Download Endowment and Similar Funds

ENDOWMENT AND SIMILAR FUNDS
E-525
Page 1
ACCOUNTING MANUAL
ENDOWMENT AND SIMILAR FUNDS
Contents
Page
I.
Introduction
3
II.
Endowment Management
A. Authorities
B. Establishment of New Funds
C. Administration
D. Accumulation of Endowment Income
4
4
4
4
5
III.
Fund Types
A. True Endowment Funds
B. Funds Functioning as Endowment
C. Funds Held in Trust by Others
D. Deferred Gifts
E. Agency Funds
5
6
6
6
7
8
IV.
Investment Pools
A. General Endowment Pool
B. High Income Pool
C. Short-Term Investment Pool
D. Separately Invested Funds
8
8
8
8
9
V.
Endowment Income Accounting and Reporting
A. Restriction Codes
B. Availability of Investment Income for Expenditures
C. Accounting for Investment Income
D. Total Return Method
E. Endowment Cost Recovery Assessment
10
10
11
11
12
13
VI.
Distribution of Principal Appropriated
13
VII.
Transfer of Income to Campuses
A. Estimate of Endowment Income
B. Transfer of Income
C. Compliance with Fund Terms
D. Return of Unexpended Income to OP
14
14
14
15
15
VIII. Distribution of Income to Outside Recipients
16
IX.
Reporting Responsibilities
17
X.
References
17
Appendix I
Appendix II
Restriction Codes--Endowment and Similar Funds
Investment Income--Account Codes
Exhibit A Total Return/Cost Recovery Calculation Example
TL 82
19
21
22
9/30/99
ENDOWMENT AND SIMILAR FUNDS
E-525
Page 2
ACCOUNTING MANUAL
ENDOWMENT AND SIMILAR FUNDS
"By pooling its endowments the University has provided
to every donor of endowment moneys an ultimate
assurance of safety, of absolute fairness of treatment,
of productivity, and of permanence for the fund which
he has created. This means that each endowment fund,
the terms of which permit such action, is regarded as
having a due proportional share in every investment
made with the moneys which represent the total of the
endowments thus pooled. Thus each endowment profits
proportionately by each particularly favorable
investment made, each is insured by the combined
millions of the whole pool, and all alike share in the
increase in productivity in the pool moneys...."
--Report of the Secretary to the Regents
for the Year Ending June 30, 1905
I.
INTRODUCTION
The Endowment and Similar Funds group consists of true
endowment funds, funds functioning as endowment, funds held
in trust by others, deferred gifts (living trust funds,
annuity trusts, unitrusts, charitable lead trusts, pooled
income, gift annuity), and agency funds.1
This chapter provides a general description of University's
endowment management program and the types of funds that
make up the endowment and similar funds group. A brief
description of the pools in which the funds in this group
are invested is provided in Section IV, Investment.
(Accounting Manual Chapter I-582, Investments and Investment
Income, provides an overview of the University's investment
operations.) This chapter also covers accounting,
reporting, and distribution of endowment income and
principal appropriated.2 In addition, the total return
method of calculating the annual payout for certain funds,
adopted recently by the Regents, is covered in Section V.D.
1
Agency funds are reported separately in the University's Annual
Financial Report, but are handled as endowments for investment
purposes.
2
Although endowment income and principal appropriated are
actually recorded in the Current Funds group, they are covered in
this chapter in order to complete the discussion of the Endowment
and Similar Funds group.
9/30/99
TL 82
ACCOUNTING MANUAL
II.
ENDOWMENT AND SIMILAR FUNDS
E-525
Page 3
ENDOWMENT MANAGEMENT
A.
AUTHORITIES
The Treasurer of The Regents is responsible for
managing the investments of the endowment and similar
funds group.
The President, as stated in section 100.4(t) of the
Standing Orders of The Regents, has the following
responsibilities:
"The President is authorized to determine, consistent
with any expressed intent of the donor, the purpose for
which and the campus or other location at which a gift
shall be used, to determine whether income and/or
principal shall be used, and to make allocations and
reallocations in accordance therewith, to the extent
not specified by the donor of a gift."
The President has redelegated this authority to the
Provost and Senior Vice President--Academic Affairs.
The President has redelegated the authority to
designate the purpose and type of fund to the
Chancellor if the donor has clearly specified the
campus at which such funds are to be used.
The Gifts and Bequests Review Committee is authorized
to allocate and reallocate gifts and bequests a) in
accordance with terms specified by the donor, to
designate the purpose for which, and the location at
which the income/or principal shall be used; and b)
consistent with any expressed intent of the donor to
make the above determinations to the extent not
specified by the donor of the gift. The Committee is
also responsible for the review of accumulated
endowment income that exceeds five years payout. (The
Development Policy and Administration Office (DPA),
University and External Relations, Office of the
President (OP), performs the staff work for these
functions.)
B.
ESTABLISHMENT OF NEW FUNDS
The Chancellor may determine the fund designation when
new funds are established from monies generated within
the University and for new funds established by gifts
or bequests, if restrictions are not stipulated by the
donor, and the amount is not in excess of $250,000.
The Chancellor is granted the same authority for funds
TL 82
9/30/99
ENDOWMENT AND SIMILAR FUNDS
E-525
Page 4
II.
ACCOUNTING MANUAL
ENDOWMENT MANAGEMENT (Cont.)
B.
ESTABLISHMENT OF NEW FUNDS (Cont.)
functioning as endowment for amounts up to $500,000.
Proposals for gifts in excess of $500,000 should be
referred to OP.
The fund designation for each new fund established in
the Endowment and Similar Funds group has three
components:
1)
Type of fund (true endowment, fund functioning as
endowment, etc.) (See Section III, Fund Types);
2)
Campus or other location at which the fund is to
be employed; and
3)
Purpose for which the fund may be used (student
aid, research, etc.).
The first designation pertains to the general
restrictions associated with the principal of the
new fund. The second and third designations
govern the specific uses of the income, whether
principal may be expended, and the conditions
under which withdrawals may be made.
When a new endowment fund is established, Financial
Management prepares the endowment fund principal and
income Account Fund Profiles (AFP) and the Fund
Attribute Table (FAT). The AFP sets up the funds in
the general ledger. The FAT contains investment
instructions, fund restrictions, donor information, a
brief synopsis of fund use, and special reporting
codes.
C.
ADMINISTRATION
The OP Financial Management office is responsible for
verifying that endowment and similar funds are
established in accordance with the terms of the fund.
This office maintains the accounting records for
principal and investment income, distributes principal
appropriated and endowment payout to campuses or to the
proper accounts for expenditure, and provides
information to each accounting officer regarding the
terms of funds distributed to his/her campus.
The accounting officer is responsible for ensuring
compliance with the terms of a fund after
appropriations have been transferred to the campuses.
9/30/99
TL 82
ACCOUNTING MANUAL
D.
ENDOWMENT AND SIMILAR FUNDS
E-525
Page 5
ACCUMULATION OF ENDOWMENT INCOME
The University is legally required to administer the
endowment funds it has accepted, in accordance with all
the terms imposed by the donor. Since an implied
requirement of the law is that the University must put
endowment payout to use, income may not accumulate for
an unreasonable period of time. To ensure compliance
with this law, The Office of the General Counsel
(General Counsel) has recommended that endowment income
should not be allowed to accumulate beyond five years.
This policy does not apply to those situations in which
the donor has implicitly or expressly authorized the
accumulation of income for longer periods.
The Gifts and Bequests Review Committee is responsible
for ensuring compliance with this policy. Accounting
officers should review endowment income balances
periodically and advise the Secretary of the Gifts and
Bequests Review Committee when income from an endowment
fund cannot be expended during the mandated period.
If the original terms of an endowment fund are so
outdated that it is difficult to expend the income, the
Chancellor should notify Financial Management, which
will request the General Counsel's assistance in
reviewing the terms of the fund. The Chancellor's
request should include a proposal outlining an
alternative use of the income that is as close to the
donor's original intention as possible. If the
outdated terms are impossible to satisfy, the General
Counsel may seek to have the terms legally altered.
III. FUND TYPES
All funds in the Endowment and Similar Funds group are
considered principal, since this fund group includes only
those funds intended for investment.
The Endowment and Similar Funds group is divided into the
following subgroups, according to the source of the
principal or restrictions on use:
•
•
•
•
•
TL 82
True endowment funds
Funds functioning as endowment
Funds held in trust by others
Deferred gifts
Agency funds
9/30/99
ENDOWMENT AND SIMILAR FUNDS
E-525
Page 6
ACCOUNTING MANUAL
III. FUND TYPES (Cont.)
A.
TRUE ENDOWMENT FUNDS
True endowment funds are funds derived from gifts or
bequests, the terms of which stipulate that principal
must remain inviolate and that only the income may be
expended. The use of income from endowment funds is
either restricted by the donor or determined by The
Regents.
The University has issued guidelines to gift officers
and others regarding the acceptance of endowments (and
other gifts) to ensure that the University will not be
bound by restrictions that are difficult to administer
or are in conflict with established University goals or
policies. These guidelines are published by the Vice
President--University and External Relations in the
Development Policy Manual.
B.
FUNDS FUNCTIONING AS ENDOWMENT
Funds in this subgroup are created by a gift or bequest
where a donor does not explicitly instruct that it be
used as either a current gift or an endowment. At its
own discretion, the University may create a fund
functioning as endowment. These funds are invested as
if they were a true endowment; however, unlike a true
endowment, the institution may authorize the
expenditure of principal. The main source of funds
functioning as endowment is private gifts and bequests.
Other examples of such funds include indirect cost
recovery on Federal and private agency contracts.
These funds are invested as endowments; subsequent
allocations for current use are made from principal.
C.
FUNDS HELD IN TRUST BY OTHERS
Funds held in trust by others are derived from private
gifts and bequests held in trust for investment by
outside trustees. The terms of the trusts that
established such funds vary; the University may be
designated as income beneficiary, principal
beneficiary, or both.
These funds are recorded in the general ledger. As
income is disbursed to the University by the trustee,
it is accounted for and used in the same manner as
income from endowment funds.
9/30/99
TL 82
ACCOUNTING MANUAL
D.
ENDOWMENT AND SIMILAR FUNDS
E-525
Page 7
DEFERRED GIFTS
Living trust funds, annuity trusts, unitrusts, pooled
income, and gift annuity funds are derived from gifts
and bequests, the terms of which stipulate that income
must be paid to a designated beneficiary for a
specified period, which in most cases is the duration
of the beneficiary's life.3
The University currently accepts the following types of
deferred gifts:
1)
Annuity trusts - A fixed dollar amount payment is
established at the time a gift is received, based
on the market value of the assets.
2)
Unitrusts - A fixed rate of payment (e.g., five
percent of the net fair market value of the trust
assets) is established and a valuation must be
made at least once a year.
3)
Pooled income funds - A share of the funds' net
income is established, based on the number of
units assigned when property is transferred to the
fund. The Regents currently have two Pooled Income
Funds, the Long Term Income Fund (LTIP) and the
General Endowment Pool Balanced Growth Fund
(GEPBG).
4)
Gift Annuity Funds (GAF) - A guaranteed lifetime
annuity is established, at a rate based on the
beneficiary's life expectancy, in return for an
irrevocable gift.4
At the end of a specified payment period, income
from these deferred gift funds reverts to the
University. The principal of such funds may then
3
Living trust funds established prior to 1969 required payment
only of income earned by the assets of the fund, rather than
payment of a set amount. The Tax Reform Act of 1969 limited the
types of charitable funds that could be accepted by institutions,
and sanctioned only the establishment of annuity trusts,
unitrusts, and pooled income funds.
4
California GAF's are regulated by the California Department of
Insurance. GAF's require that an institution set aside prudent
reserves in a trust account equivalent to the amount required to
cover future obligations on each contract.
TL 82
9/30/99
ENDOWMENT AND SIMILAR FUNDS
E-525
Page 8
ACCOUNTING MANUAL
III. FUND TYPES (Cont.)
D.
DEFERRED GIFTS (Cont.)
be transferred to the True Endowment, Funds
Functioning as Endowment, or Current Funds group,
depending on the terms stipulated by the donor and
on the amount of principal available.
E.
AGENCY FUNDS
Agency funds are funds invested by the University, in
its capacity as the custodian or fiscal agent, for
organizations that are not financially accountable to
the University, such as certain campus foundations and
UCSF Stanford Health Care. Such entities enter into a
contractual arrangement with the Treasurer's Office,
which stipulates the terms of withdrawal.
IV.
INVESTMENT POOLS
The University invests Endowment and Similar Fund group
funds in the following pools: General Endowment Pool (GEP),
High Income Pool (HIP) or Short-Term Investment Pool (STIP).
In addition, some funds may be held for separate investment.
Refer to Accounting Manual chapter I-582, Investments and
Investment Income, for more information.
A.
GENERAL ENDOWMENT POOL
The GEP primarily holds long-term securities and thus
is intended for funds that are to be retained
permanently. The GEP is the default investment for
true endowments and funds functioning as endowment.
B.
HIGH INCOME POOL
Funds invested in the High Income Pool (HIP) include:
deferred gifts, agency funds, and endowment funds where
donors have stipulated that the income must exceed that
provided by the GEP.
C.
SHORT TERM INVESTMENT POOL
Endowment and similar funds are invested in the STIP
under the following conditions:
1)
9/30/99
Funds to be invested in the GEP that were not
received on the valuation date will be invested in
STIP until the next valuation date, so that income
will accrue in the interim.
TL 82
ACCOUNTING MANUAL
2)
ENDOWMENT AND SIMILAR FUNDS
E-525
Page 9
Funds held for separate investment (see Section D
below) that do not hold a specific type of asset.
Endowment funds participate in STIP as dollar-day (Type
1) funds; STIP income earned is distributed monthly to
designated revenue accounts (J-239590-3XXXX).
Participation is based on a daily weighted average for
the month--which is ascertained from the STIP history
file. The total STIP income available for the month is
distributed in proportion to the weighted average.
Endowment income balances, however, participate in STIP
as dollar-month (Type 2) funds, and STIP income is
distributed quarterly to designated revenue accounts
(J-267911-3XXXX). Participation is based on month-end
general ledger balances. To receive STIP dollar-month
income, participating balances must average at least
$1,000 per month for the quarter.
For further information on STIP, refer to Business and
Finance Bulletin A-60, Short Term Investment Pool
(STIP)--Distribution of Income.
D.
SEPARATELY INVESTED FUNDS
Some funds in the Endowment and Similar Funds group are
held for separate investment instead of being pooled in
the GEP, e.g., funds with donor or Regents'
restrictions that prohibit pooling or limit investment
to specific classes of assets, such as bonds, stocks,
etc. In addition, the assets of some funds (e.g.,
deferred gifts) are restricted to tax-exempt securities
in order to limit a donor's tax liability. A
separately invested fund may hold its own investments
or be invested in STIP.
A number of endowment funds hold separate investments
in real estate or mortgages that are acquired through
gift or bequest.
Certain funds retain investments in oil and gas leases,
savings accounts, equities held in trust by others,
patents, copyrights, royalty assignments, etc., when
the investments are especially attractive, or when
retention is required under the terms of a fund.
Certain funds functioning as endowment are invested
separately for use as loans to other fund groups for
financing construction projects or other University
TL 82
9/30/99
ENDOWMENT AND SIMILAR FUNDS
E-525
Page 10
IV.
ACCOUNTING MANUAL
INVESTMENT POOLS (Cont.)
D.
SEPARATELY INVESTED FUNDS (Cont.)
programs. The loans, which normally bear interest, are
recorded as investments on the balance sheet of the
Endowment and Similar Funds group under the heading
Advances to Other Funds.
V.
ENDOWMENT INCOME ACCOUNTING AND REPORTING
A.
RESTRICTION CODES
A series of restriction codes precede endowment
principal account titles in the general ledger to
specify restrictions (or the absence thereof) on the
use of the income. These restrictions, which are
stipulated by the donor or The Regents, relate to
general use, specific purpose, and campus location.
(See Appendix I-A for a list of restriction codes.)
The five-digit restriction code is broken down as
follows:
1)
The first two digits, or the specific restriction
code, indicate the subgroup to which a fund
belongs--true endowment, funds functioning as
endowment, annuity funds, etc. It also indicates
whether the restriction was stipulated by the
donor or The Regents and designates the general
use of the fund.
2)
The second two digits, the purpose code, identify
more specific uses for the endowment income, as
shown in the table in Appendix I-B. These
purposes may include research, scholarships and
fellowships, purchases of library books, endowed
chairs, etc.
3)
The last digit indicates the location, i.e., the
campus to which the endowment income is to be
distributed, as designated by the donor or The
Regents. (For a list of campus codes, refer to
Accounting Manual chapter A-115-2, Accounting
Codes: General Ledger.)
The letter J is used to designate OP, multi-campus
funds, rotating funds, or funds for nonspecific
locations.
9/30/99
TL 82
ACCOUNTING MANUAL
B.
ENDOWMENT AND SIMILAR FUNDS
E-525
Page 11
AVAILABILITY OF INVESTMENT INCOME FOR EXPENDITURE
Endowment fund investment income is recorded in revenue
accounts during the year in which the income is earned
but is not made available for expenditure by the
campuses until the following year.
C.
ACCOUNTING FOR INVESTMENT INCOME
Entries into the Endowment and Similar Funds revenue
accounts are recorded via different methods, depending
upon the source of the investment income. When income
from stocks, bonds, and other securities is received,
it is entered in the Treasurer's Investment System
(TIS).
1.
Income from Securities
Securities income earned from GEP investments is
credited to revenue account J-238990-38990, and
securities income earned by separately invested
funds is credited to revenue accounts J-23959134100 to J-239591-39997 (except J-239591-38990).
Securities income, rents, mortgages, and other
types of income are entered into the OP General
Ledger.
2.
Security Lending
Occasionally, securities are loaned to brokers for
specific periods of time. The income earned is
distributed to the funds from which the securities
were loaned.
3.
Advances
Income from loans to construction projects is
recorded as part of the advances subsystem of the
TIS. The advances subsystem credits income
directly to revenue accounts, and also credits an
investment account with principal payments.
For a complete table of account codes for GEP
funds and separately invested funds, refer to
Appendix II.
For funds whose terms require that income be added
to endowment principal, investment income is
transferred on a monthly basis for GEP, HIP, and
TL 82
9/30/99
ENDOWMENT AND SIMILAR FUNDS
E-525
Page 12
V.
ACCOUNTING MANUAL
ENDOWMENT INCOME ACCOUNTING AND REPORTING (Cont.)
C.
ACCOUNTING FOR INVESTMENT INCOME (Cont.)
STIP income, and annually for all other income.
The investment income for funds that make
endowment income available for expenditure remains
in revenue accounts through the June 30 final
general ledger after which it is transferred to
unexpended balances accounts during the postclosing process. Such balances are transferred to
the campuses for expenditure or, in the case of OP
programs, are appropriated directly to location J
expenditure accounts.
D.
TOTAL RETURN METHOD
The University uses the "income-only” method of
calculating the annual payout for all endowment funds
except funds invested in the GEP. Effective for the
fiscal year beginning July 1, 1998, The Regents
approved the total return method of calculating the
annual payout for funds invested in the GEP.5 Under
this method, institutions are permitted to distribute
investment gains (both realized and unrealized) as well
as investment income (traditionally defined as rents,
royalties, dividends, and interest). Funds invested in
other vehicles, e.g., HIP, separately invested, real
estate, and oil and gas royalties, will continue to
receive payouts based on actual income earned on those
investments.
The total return payout methodology approved by The
Regents sets the payout formula as follows: up to 4.75%
of the sixty-month moving average market value for
funds invested in the GEP. This calculation is based
on the market value per share of GEP and looks at the
number of shares of GEP each participant fund holds for
each month of the fiscal year. The sixty-month average
concludes with the June 30 market value for each fiscal
year.
At the end of each fiscal year after the average market
value is calculated, an analysis is performed to
determine the total amount of payout for each fund
invested in the GEP. This figure is then compared to
5
Adoption of the total return method is predicated on the
adoption of the Uniform Management of Institutional Funds Act
(UMIFA), which The Regents approved in March 1998.
9/30/99
TL 82
ACCOUNTING MANUAL
ENDOWMENT AND SIMILAR FUNDS
E-525
Page 13
the actual income earned by the fund, and an
augmentation (or reduction) is recorded in the general
ledger. This augmentation/reduction is treated in the
University financial statements as a non-mandatory
transfer. The total return payout is transferred to
the campus in the following fiscal year.
E.
ENDOWMENT COST RECOVERY ASSESSMENT
In March 1999, The Regents passed a resolution to allow
an endowment cost recovery fee assessment for funds
currently invested in the GEP. The assessment is a
campus unique rate limited to actual costs or .15% of
the 60-month moving average (see Section D above).
Campuses provide financial data annually to Financial
Management to substantiate the rate assessed at the
campus level. Each year, as income is transferred to
the campuses the cost recovery fee is assessed and
reported separately to each campus.
Exhibit A provides examples of a total return payout
and a cost recovery assessment calculation. The total
return payout rate in effect for the fiscal year ending
June 30, 1999 is 4.35%. This rate will be reviewed
annually and may change.
VI.
DISTRIBUTION OF PRINCIPAL APPROPRIATED
When an appropriation is made from principal, the book value
of the fund is permanently reduced; this is reflected by a
permanent decrease in the balance sheet of the Endowment and
Similar Funds group. An offsetting increase appears in the
Current Funds group (if the appropriation is for current
expenditures), in the Plant Funds group (for capital
expenditures), or in the Loan Funds group (for loans).
Thus, while it may be said that principal may be expended,
the expenditure itself is not recorded within the Endowment
and Similar Funds accounts but rather within Current, Plant,
or Loan Funds accounts.
Principal appropriated for current expenditure is
transferred by financial journal entry from the principal
accounts of the Endowment and Similar Funds group to
Unexpended Balances--Principal Appropriated (account J119750, fund blocking 04100-09997) of the Current Funds
group. From these J accounts, the balances are transferred
(through financial control accounts) to local campus
Unexpended Balances--Principal Appropriated accounts (local
campus account X-119750, fund blocking 04100-09997). The
TL 82
9/30/99
ENDOWMENT AND SIMILAR FUNDS
E-525
Page 14
VI.
ACCOUNTING MANUAL
DISTRIBUTION OF PRINCIPAL APPROPRIATED (Cont.)
balances are appropriated from the local Unexpended
Balances--Principal Appropriated accounts to campus
expenditure accounts for authorized purposes.
VII. TRANSFER OF INCOME TO CAMPUSES
The following guidelines govern the transfer of endowment
income to campus accounts:
A.
ESTIMATE OF ENDOWMENT INCOME
Each spring, Financial Management prepares the Budget
of Estimated Endowment Income, which contains a
projection of the distributable Endowment and Similar
Funds group income available for expenditure during the
next fiscal year. This estimate is used to establish a
budget file for use in preparing campus operating
budgets. A copy of the student aid portion of the
budget (sections 3 to 9), which specifies the student
aid funds permanently assigned to each campus, is also
distributed to the Office of the Provost and Senior
Vice President--Academic Affairs to assist in the
equitable distribution of multi-campus funds.
On July 1 of each year, campuses make operating budget
entries in the general ledger from their revised budget
files. Adjustments to actual income are made in the
general ledger several months later when endowment
income is actually transferred to the campus ledgers.
Endowment income assigned to a campus for only one year
is established on the campus's general ledger, but not
in its budget file.
B.
TRANSFER OF INCOME
Three types of income from the Endowment and Similar
Funds group are transferred to the campus ledgers in
August of each year:
9/30/99
1)
Income from endowment funds permanently assigned
to a campus;
2)
Income from funds rotating among campuses each
year; and
3)
Income from multi-campus student aid funds
allocated by the Office of the Provost and Senior
Vice President--Academic Affairs.
TL 82
ACCOUNTING MANUAL
ENDOWMENT AND SIMILAR FUNDS
E-525
Page 15
Endowment income is transferred to the campuses via a
computer-generated journal (02-D86), which identifies
the campus location by the restriction code assigned to
each fund. The 02-D86 journal does not require a
manual response by the campuses. The income from
multi-campus, rotating, and OP funds is manually
transferred via financial journal by Financial
Management or by the campus responsible for the
administration of multiple campus funds. These
transactions require a campus response.
All endowment income is transferred from Unexpended
Balances--Endowment Income (account J-119820, fund
blocking 34100-39997), through financial control
accounts to the local unexpended balance accounts
(local campus account X-119820, fund blocking 3410039997). From these local accounts the funds are
appropriated to campus expenditure accounts for
authorized use.
C.
COMPLIANCE WITH FUND TERMS
After endowment income has been transferred to the
campuses, the campus accounting officer is responsible
for ensuring that all expenditures are made in
accordance with the terms of a fund. The accounting
officer is also responsible for notifying a designated
department that income from new endowment funds is
available to that department for expenditure.
D.
RETURN OF UNEXPENDED INCOME TO OP
Unexpended endowment income and principal appropriated
at fiscal year-end are either retained by the campus
(carried forward) or must be returned to OP. The
following guidelines govern whether unexpended funds
are retained or returned by campuses:
1.
Income Always Retained by Campuses
Unless the return of unexpended income is mandated
by the fund terms, unexpended balances of
endowment funds are retained permanently by the
campus. Campuses also retain the current year's
income of any rotating funds allocated to them for
that year.
TL 82
9/30/99
ENDOWMENT AND SIMILAR FUNDS
E-525
Page 16
ACCOUNTING MANUAL
VII. TRANSFER OF INCOME TO CAMPUSES (Cont.)
D.
RETURN OF UNEXPENDED INCOME TO OP (Cont.)
2.
Income Always Returned by Campuses
Certain funds require that unexpended income be
added to principal; such income must be returned
to OP by September 30 (three months after the
fiscal year end). Financial Management provides
accounting officers with a list of these funds
each year, as part of the fiscal closing process.
3.
Income Retained by Campuses for Specific Purposes
The income from some OP endowment funds is
allocated to campuses to carry out specific
projects or programs and may be expended only for
these authorized purposes. At fiscal closing,
Financial Management provides the accounting
officers with a list of those funds from which
specific allocations have been made. The campuses
retain the unexpended income for any projects or
programs that are still in progress; all other
unexpended balances must be returned to OP.
VIII.DISTRIBUTION OF INCOME TO OUTSIDE RECIPIENTS
Living trust funds, annuity trusts, unitrusts, pooled income
funds, and gift annuity funds require the distribution of
income to recipients outside the University. This income is
distributed by Financial Management in accordance with
agreements with annuitants and trust beneficiaries, or as
required by the terms of the fund. Some annuity funds
specify that part of the income earned may be retained for
the benefit of the University.
The income from agency funds is also distributed to
recipients outside the University, since the University is
merely acting as a custodian or fiscal agent for these
funds. Agency funds income is distributed in accordance
with the agency's requirements, or as soon as possible after
June 30.
Living trust fund, annuity trust, and unitrust disbursements
are charged to a nonreportable expenditure account, Payment
to Beneficiaries (account J-804020, fund blocking 3410039997). In the University's annual Financial Report,
payments to beneficiaries are recorded as adjustments to
funds balances in the Current Funds group.
9/30/99
TL 82
ACCOUNTING MANUAL
IX.
ENDOWMENT AND SIMILAR FUNDS
E-525
Page 17
REPORTING RESPONSIBILITIES
Each campus is responsible for providing financial
statements or reports, as required, to donors or recipients
of income from endowments administered by the campus.
Financial Management is responsible for providing financial
statements or reports, as required, to donors or designees
for funds whose income benefits more than one campus.
X.
REFERENCES
Development Policy Manual, Development Policy and
Administration, Office of the Vice President--University and
External Relations.
Standing Orders of The Regents:
Section 100.4 (s) and (t):
Duties of the President
in regard to allocations
of gifts.
Section 100.4 (dd): Duties of the President in regard
to solicitation and acceptance of
gifts.
The Regents, Minutes adopting the policy on endowed chairs,
May 21, 1998.
Vice President Donald Swain, Memorandum to Acting Assistant
Vice President J. A. Pastrone on the allocation of
unrestricted gifts of $1,000 or less, May 14, 1980.
Senior Vice President Frazer, Memorandum to Associate Vice
President Pastrone on the allocation of unrestricted
bequests, January 8, 1988.
Delegations:
President David P. Gardner, Memorandum to Chancellors
delegating authority to allocate gifts, July 19, 1985 (See
DA 1052).
President J.W. Peltason, Memorandum to Chancellors, Vice
President--Agriculture and Natural Resources, and Vice
President--University and External Relations delegating
authority to solicit and accept gifts, March 23, 1994 (See
DA 2011).
President J.W. Peltason, Memorandum to Provost Massey
delegating authority to allocate gifts and bequests, January
12, 1995 (See DA 2030).
TL 82
9/30/99
ENDOWMENT AND SIMILAR FUNDS
E-525
Page 18
X.
ACCOUNTING MANUAL
REFERENCES (Cont.)
President Richard C. Atkinson, Memorandum to Associate Vice
President Hershman delegating authority to allocate
operating funds, February 27, 1997 (See DA 2081).
Business and Finance Bulletin
A-60, Short-Term Investment Pool (STIP)--Distribution
of Income.
Accounting Manual chapters:
A-115-1, Account Classification.
A-115-2, Accounting Codes, General Ledger.
A-115-3, Accounting Codes: Transaction Codes for Fund
Balances Accounts.
I-582, Investments and Investment Income.
____________
Historical note: Accounting Manual chapter first published
3/1/71. Revised 12/1/85, 9/30/99, and 6/30/00; analyst--Claudia
Hardin.
6/30/00
TL 84
ACCOUNTING MANUAL
ENDOWMENT AND SIMILAR FUNDS
E-525
Page 19
APPENDIX I-A - RESTRICTION CODES--ENDOWMENT AND SIMILAR FUNDS
SPECIFIC RESTRICTION CODE (FIRST TWO DIGITS) 12114
Code No.
11
12
13
15
16
18
21
22
23
24
25
26
27
28
29
31
32
35
36
**43
45
46
47
48
49
50
TL 84
Restriction
Endowment Funds
Unrestricted
Restricted by The Regents for educational and general
purposes--allocated for general purposes or
allocated to specific departments or activities
Restricted by The Regents for student aid
Restricted by donor for educational and general
purposes
Restricted by donor for student aid
Restricted by donor for loan funds
Funds Functioning as Endowment
Unrestricted
Restricted by The Regents for educational and general
purposes--allocated for general purposes or
allocated to specific departments or activities
Restricted by The Regents for student aid
Restricted by The Regents for auxiliary enterprises
Restricted by donor for educational and general
purposes
Restricted by donor for student aid
Restricted by donor--purpose to be designated later
Loan funds
General Endowment Pool reserve
Funds Held in Trust by Others
Held by others with the University as beneficiary
of income:
Unrestricted
Restricted by The Regents for educational and
general purposes--allocated for general purposes
Restricted by donor for educational and general
purposes
Restricted by donor for student aid
Annuity and Living Trust Funds
Gift Annuity Funds
Annuity Fund (1969 Tax Reform Act)
Unitrust (1969 Tax Reform Act)
Pooled Income (1969 Tax Reform Act)
Annuity funds
Trust agreements
Agency Funds
Invested for affiliated organizations of the
University as a service
**Addition 6/30/00
ENDOWMENT AND SIMILAR FUNDS
E-525
Page 20
ACCOUNTING MANUAL
APPENDIX I-B
PURPOSE CODE (SECOND TWO DIGITS) 1211 4
Code No.
11
21
**22
Restriction
General purposes
Departmental purposes
School purposes
31
32
Professorships
Chairs
Other
41
42
43
Research
Cancer research
Medical research
Other research
51
52
Lectures
Committee on Arts and Lectures
Departmental lectures
61
62
Libraries
General library
Departmental libraries
71
72
73
74
75
76
77
Student Aid
Undergraduate scholarships
Graduate scholarships and fellowships
Graduate or undergraduate scholarships
Prizes and awards
Gifts and grants-in-aid
Loan funds held in trust--no income
Multipurpose student aid
85
Various purposes
Multipurpose funds
Miscellaneous purpose funds
Income added to principal and principal withdrawn
for use
Income added to principal to build up fund for
ultimate use
Income added to loan fund
91
92
93
Trust and agency funds
Annuity funds
Trust funds
Agency funds
81
82
83
84
**Addition 6/30/00
TL 84
ENDOWMENT AND SIMILAR FUNDS
E-525
Page 21
ACCOUNTING MANUAL
APPENDIX II
INVESTMENT INCOME--ACCOUNT CODES
GEP ACCOUNTS
SEPARATELY
INVESTED ACCOUNTS
INVESTMENT INCOME
238992 - 38990
--
VA MORTGAGE LOANS
238999 - 38990
--
FHA MORTGAGE LOANS
238993 - 38990
239593 - 3XXXX
CONVENTIONAL MORTGAGE
LOANS
238994 - 38990
239594 - 3XXXX
REAL ESTATE
238995 - 38990
239595 - 3XXXX
MISCELLANEOUS LOANS
AND CONTRACTS
238996 - 38990
239596 - 3XXXX
OIL AND GAS LEASES
238997 - 38990
239597 - 3XXXX
SECURITY LOANS
238998 - 38990
239598 - 3XXXX
MORTGAGE PASS-THROUGH
CERTIFICATES
238990 - 38990
239591 - 3XXXX
SEPARATE INVESTMENTS
239590 - 38990
239590 - 3XXXX
STIP $ DAY
267911 - 38990
267911 - 3XXXX
STIP $ MONTH
239592 - 3XXXX
ADVANCES
--
TL 82
9/30/99
ENDOWMENT AND SIMILAR FUNDS
E-525
Page 22
ACCOUNTING MANUAL
Exhibit A: University of California
Examples of Endowment Total Return/Cost Recovery Calculations
1. Endowment Invested at Same Level all Year
Avg Mkt X Endowment X
As of the
Shares in
Value Per
End of
GEP
Month: Share GEP
JUL
AUG
SEP
OCT
NOV
DEC
JAN
FEB
MAR
APR
MAY
JUN
12.39978
12.39978
12.39978
12.39978
12.39978
12.39978
12.39978
12.39978
12.39978
12.39978
12.39978
12.39978
13,773
13,773
13,773
13,773
13,773
13,773
13,773
13,773
13,773
13,773
13,773
Monthly Total
Return Rate
= 4.35%/12
=
Total Return
Payout
Amount
Monthly Cost
Recovery Rate
=.15%/12
=
Cost
Recovery
Amount
0.00363
$619.10
0.000125
$21.35
0.00363
$619.10
0.000125
$21.35
0.00363
$619.10
0.000125
$21.35
0.00363
$619.10
0.000125
$21.35
0.00363
$619.10
0.000125
$21.35
0.00363
$619.10
0.000125
$21.35
0.00363
$619.10
0.000125
$21.35
0.00363
$619.10
0.000125
$21.35
0.00363
$619.10
0.000125
$21.35
0.00363
$619.10
0.000125
$21.35
0.00363
$619.10
0.000125
$21.35
0.00363
$619.10
0.000125
$21.35
13,773
TOTAL
$7,429.26
$256.18
2. Endowment Established During Year with Additional Gifts During Year
As of the
End of
Month:
JUL
12.39978
AUG
12.39978
SEP
OCT
NOV
DEC
JAN
FEB
MAR
APR
MAY
JUN
X Endowment X
Shares in
GEP
12.39978
12.39978
12.39978
12.39978
12.39978
12.39978
12.39978
12.39978
12.39978
12.39978
500
500
500
723
723
Monthly Total
=
Return Rate
= 4.35%/12
0.00363
Total Return Monthly Cost
=
Payout
Recovery Rate
Amount
=.15%/12
$0.00
0.000125
Cost
Recovery
Amount
$0.00
0.00363
$0.00
0.000125
$0.00
0.00363
$0.00
0.000125
$0.00
0.00363
$0.00
0.000125
$0.00
0.00363
$0.00
0.000125
$0.00
0.00363
$0.00
0.000125
$0.00
0.00363
$22.47
0.000125
$0.77
0.00363
$22.47
0.000125
$0.77
0.00363
$22.47
0.000125
$0.77
0.00363
$32.50
0.000125
$1.12
0.00363
$32.50
0.000125
$1.12
0.00363
$33.71
0.000125
$1.16
750
TOTAL
9/30/99
$166.13
$5.73
End.
TL 82